Monday, April 06, 2009

The Enron Death Star

Must read piece from RortyBomb on the problem with banks being allowed to bid on asset sales in the PPIP, as I addressed last week (hat tip Zerohedge). I'd also recommend "The Smartest Guys in the Room" - the story of the deception at Enron - to everyone. The parallels Mike@Rortybomb draws between Enron's scam and the government's role in the PPIP are startling, and accurate.

"The Death Star strategy (yes, they called it that) was where Enron would take a fee for relieving a congested market of its excess supply by moving it elsewhere. Just like our legacy assets! There are too many of them, it is clogging up trade, let’s get them to someone else who wants them. However Enron would just move the energy in a circle, collecting a fee for not doing what it was supposed to. As their memo famously said, they are paid “for moving energy to relieve congestion, without actually moving any energy or relieving any congestion.” And, it appears, that the large banks are gearing up to do just that; with the Geitner Death Star that they’ll just be collecting a large fee to run them in a circle, without actually moving any of them off their collective books. For old time’s sake, I hope they route their loan bids through Oregon and then Utah before putting them back right where they started. Mind you that was the electrical grid of California - this appears to be at the scale of the entire financial market."

Oy Vey indeed...

In other news, courtesy of Dealbreaker - a case study in how to run a successful nightclub: NYC's Marquee.


No comments: